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Goldman Sachs sued by credit union watchdog

NEW YORK (CNNMoney) -- A federal watchdog for the credit union industry slapped Goldman Sachs with a lawsuit on Tuesday, alleging violations of federal and state laws tied to the sale of mortgage-backed securities.

The National Credit Union Administration filed suit in California district court against the financial firm for damages in excess of $491 million.

The agency, which regulates and charters credit unions, alleges that Goldman (GS, Fortune 500) misrepresented securities it sold to the now-defunct U.S. Central and Western Corporate federal credit unions.

Specifically, the NCUA claims that Goldman's misrepresentations caused the credit unions to believe certain investments carried minimal risk, while that was not the case.

Those investments -- mortgage-backed securities -- plummeted in value during the 2008 financial crisis, leading to the downfall of the credit unions.

"Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions." said NCUA Board Chairman Debbie Matz in a statement.

A spokesman for the Goldman had no comment on the lawsuit. At the close of trading, the bank's shares were up slightly. But the stock fell initially after news of the lawsuit broke.

The NCUA acts as the liquidating agent for the failed corporate credit unions, and previously filed a series of lawsuits against JPMorgan (JPM, Fortune 500) and the Royal Bank of Scotland (RBS). In sum, the agency is seeking total damages of nearly $2 billion.

The credit union regulator vowed to take further action against similar abuses in the future. "Additional law suits may follow," it said.